CNA Financial Announces First Quarter 2013 Results:

CNA Financial Announces First Quarter 2013 Results:

  • Net Operating Income of $231 Million

  • P&C Net Written Premium Growth of 10%

  • Book Value Per Share Excluding AOCI of $43.30, an Increase of 2%

  • Operating ROE of 8%

  • Quarterly Dividend of $0.20 Per Share

CHICAGO--(BUSINESS WIRE)-- CNA Financial Corporation (NYS: CNA) today announced first quarter 2013 results, which included net operating income of $231 million, or $0.86 per share, and net income of $250 million, or $0.93 per share. Property & Casualty Operations' combined ratio for the first quarter was 101.5%.

CNA Financial also declared a quarterly dividend of $0.20 per share, payable May 29, 2013 to stockholders of record on May 13, 2013.

Results for the Three Months

Ended March 31 (a)

($ millions, except per share data)

2013

2012

Net operating income

$

231

$

226

Net income

250

250

Net operating income per diluted share

0.86

0.84

Net income per diluted share

0.93

0.93

March 31, 2013

December 31,
2012

Change

Book value per share

$

46.00

$

45.71

1

%

Book value per share excluding AOCI

43.30

42.62

2

%

(a)

Management utilizes the net operating income financial measure to monitor the Company's operations. Please refer to Note O in the Consolidated Financial Statements within CNA's Annual Report on Form 10-K for the year ended December 31, 2012 for further discussion of this measure.


Property & Casualty Operations' net operating income was $257 million for the first quarter of 2013 as compared with $271 million in the prior year quarter. Improved non-catastrophe current accident year underwriting results were more than offset by lower net investment income, higher catastrophe losses and decreased favorable net prior year development. Net written premiums grew 10% year over year, primarily due to increased rates across both CNA Specialty and CNA Commercial.

Net operating results for our non-core segments improved $19 million as compared with the prior year quarter. Results in the Life & Group Non-Core segment improved primarily due to favorable experience in our long term care business.

Pretax net investment income decreased to $633 million for the first quarter of 2013 as compared with $648 million in the prior year quarter. The decrease was primarily driven by lower fixed maturity securities income due to the effect of purchasing investments at lower interest rates, partially offset by a higher invested asset base. Our limited partnership portfolio produced consistently superior returns in both periods.

After-tax net realized investment gains decreased to $19 million for the first quarter of 2013 as compared with $24 million for the prior year quarter, driven by lower realized gains on sales of securities, partially offset by lower other-than-temporary-impairment (OTTI) losses recognized in earnings.

Property & Casualty Operations

"While we are encouraged by our growth momentum, our primary focus remains the need to drive improvement in our underwriting margins, which improved modestly in the first quarter. We expect to accelerate our progress through the remainder of 2013 and into 2014 as sustained rate increases and non-rate underwriting actions continue to improve our results," said Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial Corporation.

Results for the Three Months Ended

March 31

($ millions)

2013

2012

Net written premiums

$

1,776

$

1,608

NWP Growth (% year over year)

10

%

3

%

Net operating income

$

257

$

271

Loss ratio

67.5

%

68.6

%

Effect of catastrophe impacts

(2.4

)

(1.9

)

Effect of development-related items

1.9

2.1

Loss ratio excluding catastrophes and development

67.0

%

68.8

%

Combined ratio

101.5

%

102.0

%

Combined ratio excluding catastrophes and development

101.0

%

102.2

%

Business Operating Highlights

CNA Specialty

Results for the Three Months Ended

March 31

($ millions)

2013

2012

Net written premiums

$

803

$

765

NWP Growth (% year over year)

5

%

4

%

Net operating income

$

140

$

132

Loss ratio

64.3

%

66.3

%

Effect of catastrophe impacts

(0.2

)

(0.2

)

Effect of development-related items

2.9

1.7

Loss ratio excluding catastrophes and development

67.0

%

67.8

%

Combined ratio

95.0

%

97.3

%

Combined ratio excluding catastrophes and development

97.7

%

98.8

%

  • Net written premiums increased $38 million for the first quarter of 2013 as compared with the prior year quarter. This increase was primarily driven by increased rate. Average rate increased 7% for the first quarter of 2013 as compared with an increase of 3% for the prior year quarter for the policies that renewed in each period. Retention of 86% was achieved in each period.

  • Net operating income increased $8 million for the first quarter of 2013 as compared with the prior year quarter. This increase was primarily due to improved underwriting results, partially offset by lower net investment income.

  • The combined ratio improved 2.3 points for the first quarter of 2013 as compared with the prior year quarter. The loss ratio decreased 2.0 points, due to both higher favorable net prior year development and an improved current accident year loss ratio. The expense ratio improved 0.8 point, primarily due to the impact of a higher net earned premium base.

CNA Commercial

Results for the Three Months Ended

March 31

($ millions)

2013

2012

Net written premiums

$

918

$

843

NWP Growth (% year over year)

9

%

2

%

Net operating income

$

125

$

139

Loss ratio

71.7

%

70.7

%

Effect of catastrophe impacts

(4.6

)

(3.3

)

Effect of development-related items

1.5

2.5

Loss ratio excluding catastrophes and development

68.6

%

69.9

%

Combined ratio

106.8

%

106.2

%

Combined ratio excluding catastrophes and development

103.7

%

105.4

%

  • Net written premiums increased $75 million for the first quarter of 2013 as compared with the prior year quarter. This increase was primarily driven by increased rate. Average rate increased 9% for the first quarter of 2013, as compared with an increase of 5% for the prior year quarter for the policies that renewed in each period. Retention of 78% and 77% was achieved in each period.

  • Net operating income decreased $14 million for the first quarter of 2013 as compared with the prior year quarter. This decrease was primarily due to lower net investment income, higher catastrophe losses and decreased favorable net prior year development. These unfavorable impacts were partially offset by improved non-catastrophe current accident year underwriting results.

  • The combined ratio increased 0.6 point for the first quarter of 2013 as compared with the prior year quarter. The loss ratio increased 1.0 point, primarily due to the impacts of higher catastrophe losses and decreased favorable net prior year development, partially offset by an improved current accident year non-catastrophe loss ratio.

Hardy

Results for the Three

Months Ended March 31

($ millions)

2013

Net written premiums

$

55

Net operating loss

(8

)

Loss ratio

48.7

%

Effect of catastrophe impacts

Effect of development-related items

(1.4

)

Loss ratio excluding catastrophes and development

47.3

%

Combined ratio

105.5

%

Combined ratio excluding catastrophes and development

104.1

%

  • Hardy, a specialized Lloyd's of London underwriter, was acquired on July 2, 2012.

  • Net written premiums were $55 million for the first quarter of 2013. Average rate increased 1% for the first quarter of 2013 for the policies that renewed in the period. Retention of 70% was achieved in the period.

  • Results included non-run rate purchase accounting expenses of $3 million and foreign currency transaction losses of $2 million. No catastrophe losses were incurred in the period.

  • The combined ratio excluding catastrophes and prior year development was 104.1% for the first quarter of 2013. The expense ratio was 56.8% for the first quarter of 2013, which was adversely affected by the level of premiums, including unfavorable premium development of $4 million.

Life & Group Non-Core

Results for the Three Months Ended

March 31

($ millions)

2013

2012

Operating revenues

$

349

$

337

Total claims, benefits and expenses

372

387

Net operating income (loss)

(19

)

  • Net operating results improved $19 million for the first quarter of 2013 as compared with the prior year quarter. While the improved results reflect favorable mortality outcomes across all of our life businesses, they were primarily attributable to favorable morbidity and persistency in our long term care business.

Corporate & Other Non-Core

Results for the Three Months Ended

March 31

($ millions)

2013

2012

Operating revenues

$

10

$

14

Total claims, benefits and expenses

49

54

Net operating loss

(26

)

(26

)

  • Corporate & Other Non-Core primarily includes certain corporate expenses, including interest on corporate debt, and the results of certain property and casualty business in run-off, including CNA Re and A&EP. Results in 2013 were comparable to the prior year period.

Net Operating Income (Loss)

Results for the Three

Months Ended March 31

($ millions)

2013

2012

CNA Specialty

$

140

$

132

CNA Commercial

125

139

Hardy

(8

)

Total P&C Operations

257

271

Life & Group Non-Core

(19

)

Corporate & Other Non-Core

(26

)

(26

)

Total

$

231

$

22

Net Income (Loss)

Results for the Three

Months Ended March 31

($ millions)

2013

2012

CNA Specialty

$

142

$

138

CNA Commercial

128

146

Hardy

(7

)

Total P&C Operations

263

284

Life & Group Non-Core

9

(11

)

Corporate & Other Non-Core

(22

)

(23

)

Total

$

250

$

250

Property & Casualty Operations Gross Written Premiums

Results for the Three

Months Ended March 31

($ millions)

2013

2012

CNA Specialty

$

1,317

$

1,273

CNA Commercial

960

887

Hardy

107

Total P&C Operations

$

2,384

$

2,160

Property & Casualty Operations Net Written Premiums